Posts with tag: BTL portfolios

A report from the buy-to-let broker Mortgages for Business suggests that existing buy-to-let landlords will look to extend their existing portfolios during the rest of 2015.

Hunting for deals

The findings from the survey indicate that 65% of UK landlords questioned in April said they were looking to buy at least one more property within the next six months. This is in comparison to 55% last November.[1]

Additionally, only 8% of landlords said that they were currently looking to sell a property, whereas 27% said they intend to keep their existing portfolio for the duration of the year.[1]

David Whittaker, managing director of Mortgages for Business, commented that, ‘landlords are better capitalised and now more confident for reinvesting.’ He believes that a, ‘strong rental market is being driven by tenants moving to make the most of job opportunities and now gradually starting to earn more too.’[1]

Whittaker continued by saying that this, ‘new surge of demand is putting more upwards pressure on rents and landlords are only just beginning to supply more homes to let in response. On top of this, after the surprise stability of a majority government, landlords will almost certainly see a short-term boost of house price growth-while the threat of damaging regulation has been lifted for at least the next five years.’[1]

Financing

Findings from the report also showed that landlords are changing tact when choosing how to finance borrowing. 26% of landlords said that they would like a variable rate for new buy-to-let mortgages, rising from 23% in November. With this said, deciding to set repayments for a short time is less popular than six months ago. 22% of landlords said that they would go for a two-year deal, in comparison to 23% last year. 12% said that they would choose a three-year fixed deal, down from 15% in November. Comparatively, long-term mortgages have gained in popularity. 10% of landlords said that they would go for a ten year fixed rate mortgage, up from 8% six months ago.[1]

Landlords’ average loan-to-value ratios have dropped to 54% from 57%. Furthermore, the number of landlords with borrowing over 75% LTV has dropped to 12% from 16% six months ago. 81% of buy-to-let landlords have borrowing costs less than 75% LTV.[1]

Whittaker explains that, ‘over the medium term, interest rate expectations have never been friendlier to landlords. This is clearly reflected in the proportion willing to eschew guaranteed stability in favour of some immediate savings. Over a two year period this may be rational and landlords as a whole don’t tend to take extraordinary risks with their financial position.’[1]

He believes that, ‘over the longer-term, the stability of a fixed rate is likely to pay off and given how five year fixes are barely more expensive than some variable rates we maintain in our existing advice to fix now if it fits with a landlords’ investment plans over the next five to ten years.’[1]

More support

Disappointingly, just 30% of landlords believe that lenders are doing enough to support property investors. 20% said that they felt mortgage lenders should be lending them a greater amount and another 20% felt that lenders should reduce rates further, despite record-low rates already being recorded.[1]

However, by far the greatest demand from the landlords questioned is that lenders ease lending criteria. 57% said that lenders should be less picky in their selection of borrowers.[1]

Whittaker concluded by saying, ‘buy to let mortgage lending is a relatively new aspect of finance, only really defined in its modern form for a couple of decades.  But as the financial world evolves certain safe-guards tend to be proven ineffective or irrelevant – and the same is true for buy to let.’

‘For example, it is hard to prove who is on average the better borrower: a professional landlord with three properties but a minimal external income, or a part-time landlord with one investment property but a well-paid job. Lenders are still adapting and improving their models for these things. But property investors are understandably annoyed when their personal circumstances aren’t taken into account, and good lenders won’t want to avoid too many borrowers unnecessarily.’[1]

 

[1] http://www.propertyreporter.co.uk/landlords/two-thirds-of-landlords-now-planning-to-buy-new-btl-properties.html